Mortgage Income Tax Return System to Cease Operation in Regions as Well

The system for returning income tax directed to mortgage loan interest will cease to operate in the regions adjacent to Yerevan starting in 2025, and in other regions from 2029, announced Arman Poghosyan, Deputy Minister of Finance, during a meeting of the National Assembly's Economic Affairs Committee.

One of the objectives of the proposed amendments to Armenia's Tax Code is to mitigate the steady growth of returned income tax amounts on mortgage loans in the long term. According to the Deputy Minister, a negative aspect of this system is its disproportionate impact on income redistribution, as primarily middle and high-income individuals benefit from it.

“The effective tax rate for high and middle-income groups is significantly lower since they receive full or partial refunds compared to the effective tax rate of citizens who do not benefit from this system. We can actually say that the income tax has elements of regressiveness,” he stated.

A law was adopted at the end of 2021, which established a certain timeline for ceasing the application of the system in Yerevan. The deadline is January 1, 2025, meaning that starting from this date, refunds on mortgage loan interest will no longer be applicable for loans received afterward.

“A similar solution is proposed for the regions, following roughly the same logic but with longer timelines. For regions adjacent to Yerevan, it is proposed to cease the application of the benefit for mortgage loans received after January 1, 2027, while for the remaining regions, it will be after January 1, 2029, with an exception made for border communities,” said Poghosyan, adding that the proposed regulation will not have a retroactive effect.

There is also a change concerning the quarterly maximum limit for returned income tax. The legislation currently sets this limit at 1.5 million dram, while the proposed amendment suggests reducing it to 750 thousand dram.

The return of income tax amounted to approximately 52 billion dram in 2023, compared to 36.5 billion dram in 2022. This year, the estimate is around 80 billion dram.

The proposed bill received a positive conclusion in the committee and will be discussed in a plenary session.